Sony’s Hirai Sells Property Instead of TVs as Revival Stalls

Kazuo Hirai, president and chief executive officer of Sony Corp., is seen on April 12, 2012. Hirai, who took over in April, is trying to revive the electronics business by focusing on mobile devices, games and digital imaging. Photographer: Tomohiro Ohsumi/Bloomberg

Feb. 8 (Bloomberg) -- Sony Corp. President Kazuo Hirai is
relying on selling real estate to make the company’s first
profit in five years as he struggles to find products able to
compete with Apple Inc. and Samsung Electronics Co. devices.

Japan’s largest consumer-electronics maker posted an eighth
straight quarterly loss and again cut sales targets for TVs,
gaming devices and compact cameras. It reiterated a forecast for
full-year net income of 20 billion yen ($215 million), including
gains from the $1.1 billion sale of a New York building.

The company dropped 10 percent, the most since Nov. 6, 2008,
to close at 1,365 yen in Tokyo trading. It was the worst
performer among the 225 members of the benchmark Nikkei 225
Stock Average, which slid 1.8 percent. Bonds slumped.

“Sony’s earnings underscore the difficulties in the
electronics market,” Goldman Sachs Group Inc. analysts, led by
Takashi Watanabe, said in a note today. “We stay cautious
considering the shrinking market for Sony’s conventional
products and tougher competition.” They reiterated a neutral
rating.

The company’s zero-coupon convertible notes maturing in
November 2017 dropped 8.8 percent to 147 yen per 100 yen face
value as of 3:12 p.m. in Tokyo, according to prices from Nomura
Holdings Inc.

Targets Cut

Hirai made progress toward turning around an unprofitable
TV business even as Sony posted a quarterly net loss of 10.8
billion yen on sluggish sales of liquid-crystal display sets,
digital cameras and personal computers. His revival plan
featuring 10,000 job cuts hasn’t delivered the same results as
that of Panasonic Corp. President Kazuhiro Tsuga, whose company
posted surprise net income of 61 billion yen.

The company cut its sales forecast for portable game
players in the year ending March to 7 million units from the 10
million predicted three months ago and the 16 million forecasted
in May. The TV sales outlook was pared to 13.5 million units
from 17.5 million predicted in May.

The electronics business faces a “tough environment,”
Chief Financial Officer Masaru Kato said at a briefing. The
company expects an 80 billion-yen loss at its TV-making
operations this fiscal year. The imaging and gaming divisions
will have “significant” drops in operating profits, it said.

Asset Sales

The TV maker reported a nine-month net loss of 50.9 billion
yen, meaning it needs a profit of about 70 billion yen in the
fourth quarter to hit its full-year goal. It expects operating-income gains of about $685 million (64 billion yen) from selling
the New York building, with the sale to Chetrit Group due to
close next month.

The company is also looking at other possible asset sales,
some of which are included in the full-year forecast, Shiro
Kambe, a spokesman, said yesterday. It has previously sold land,
buildings, businesses and securities holdings, Kato said.

Sony may fetch 100 billion yen by selling its 25-story
office building in Tokyo, Reuters reported Jan. 10, citing
people with direct knowledge of the plan.

Sony sold a chemical-products making unit and stakes in two
display-making ventures after racking up 692 billion yen in
losses selling TVs.

Currency Swings

Sony posted a third-quarter operating profit of 46.4
billion yen, compared with an operating loss of 91.7 billion yen
a year earlier, and boosted sales to 1.95 trillion yen from 1.82
trillion yen. The company was expected to post net income of 21
billion yen, based on the average of three analyst estimates
compiled by Bloomberg. Its restructuring charges more than
tripled to 16.7 billion yen.

“Sony is supposed to sell strong products that aren’t
reliant on currency swings,” said Yuuki Sakurai, president of
Fukoku Capital Management Inc. “We need to see those products
before we’ll invest in Sony again.”

Panasonic is in “transition” toward profitability, Chief
Financial Officer Hideaki Kawai said Feb. 1 after the company
eliminated more than 38,000 jobs in the past year. Domestic
rival Sharp Corp. also reported made its first operating profit
in five quarters.

Weak Yen

The yen has plunged since the end of September, helped by
new Prime Minister Shinzo Abe’s call for “bold monetary
policy” to beat deflation and weaken the currency. Currency
depreciation will boost Sony’s second-half sales by 130 billion
yen and operating profit by 17 billion yen, Kato said.

“It’s not that we are counting on a weaker yen trend, but
if the trend continues, there will be a significant upside for
our earnings in the coming fiscal year,” he said.

Speculation that the weaker yen will boost earnings had
helped Sony’s shares almost double in Tokyo trading in two
months.

Hirai, who took over in April, is trying to revive the
electronics business by focusing on mobile devices, games and
digital imaging. He is cutting jobs and has pledged to make the
TV unit, the world’s third-biggest, profitable in the year
starting April 1.

Apple, Samsung

The company also raised 150 billion yen selling five-year
convertible bonds in November, its first offering of such
securities since 2003.

The mobile-products division, which makes Xperia
smartphones and tablet computers, posted an operating loss of
21.3 billion yen, narrower than the loss of 48.4 billion yen a
year earlier. The loss at the home-entertainment unit, which
includes TVs, narrowed to 8 billion yen from 89.8 billion yen.

Sony is adding new products in a bid to lure consumers from
Apple iPads and Samsung Galaxy devices. At last month’s Consumer
Electronics Show in Las Vegas, it introduced new higher-definition TVs, water-resistant smartphones and a more-powerful
digital camera. The company also revealed plans to offer Ultra-High Definition content from Sony Pictures for downloading on
its TVs.

Next PlayStation

A PlayStation event has been announced for Feb. 20, stoking
speculation the company will unveil a fourth-generation gaming
console. Sony also has invested in medical-device maker Olympus
Corp. and gaming platform company Gaikai Inc., and in facilities
to make image sensors.

Suwon, South Korea-based Samsung -- the world’s biggest
maker of smartphones, TVs and computer-memory chips -- last
month warned that profit this year would be hit by a
strengthening won. It also said global demand for smartphones
was slowing.

Apple’s profit grew at the slowest pace since 2003 in the
quarter ended December as the lack of a low-cost iPhone dented
growth in emerging markets.